Can the Zimbabwean School of Economics SAVE THE WORLD??...

The bearmarket rally in the broad US stockmarket is thought to have about
run its course, although it could run as far as 900 on the S&P500 for reasons
set out below. The rally had its origins in extremes of negative sentiment
before it started, so that once it got underway it was fuelled by short covering
and media hype, especially the Obama optimism effect. In particular the big
jump on Monday was portrayed almost as the start of a new bullmarket. Actually,
Wall St had good reason to celebrate on Monday, for as Dr Housing Bubble makes
clear in his article Public
- Private Investment Plan for Dummies , the PPIP as it is known is just
another gigantic scam to funnel taxpayers money into Wall St's pockets. We
should therefore bear in mind that due to this latest highly successful fleecing
of the taxpayer by Wall St, we could see the rally continue even further to
the 900 area on the S&P500. However, upcoming earnings are expected to
be AWFUL and this should pull the rug from under this rally before much longer.
So if we see any significant further progress by the broad indices it will
be time to go short.

There are two central problems that prohibit the return to normal healthy
growth of the US economy. One is that natural cyclical recessionary forces
have been obstructed for so long that they have built up to disastrous proportions,
especially as speculation and pyramiding via derivatives have ballooned the
excesses to astronomic proportions, and as is already plainly obvious, these
forces are now unstoppable. Like King Canute trying to stop the tide coming
in, the response of the system to these devastating corrective forces is to
try to beat them back by employing more of the excesses that created the problems
in the first place. Hence the continued bailouts and the buying up of Treasuries
etc. This is like a gambler on a losing streak finally going down in a blaze
of glory as he throws everything he has on to the table, only to lose anyway
and be shown the door. The ultimate outcome of all this will be a hyperinflationary
depression - money becoming worthless and most everyone and everything broke
and dysfunctional. The other central problem is that the country is essentially
run as a gigantic crime syndicate - corruption at the top, across the government
and throughout the banks and Wall St is now so deep rooted and endemic that
there is only one way that the people can rid themselves of it. Right now,
after years of soft living the population don't have the stomach to do what
is necessary to rid themselves of these parasites, and it will only be when
the television flickers and dies and the supermarket shelves are empty that
the average American hauls his weighty posterior out of the armchair with the
intention of "doing something about it" only to find himself being taken down
to one of the large compounds already organized where he can meet and chat
with plenty of people like himself.

With last week's announcement by the Fed and subsequent developments, the
powers that be have "nailed their colors to the mast" and made it plain that
they are going to manufacture as much money as they think is necessary to prevent
the system from imploding - in particular to stop the Treasury market from
collapsing and to keep the zombie entities at the center of the crisis limping
along. What they have neglected to mention, and what you have to figure out
for yourself, is that given the magnitude of debt and especially the enormity
of the derivative deleveraging going on, they are going to end up creating
blizzards of money to battle the monster, and that means that we are on the
road to hyperinflation. Yet, despite the intent to exponentially increase the
money supply to battle the deflationary juggernaut, there is no guarantee that
they will succeed - on the contrary, due to its enormity, they are likely to
fail, and their obstinate and misguided attempts to block the necessary cleansing
forces of contraction, obstructed for so long that they have built up to disastrous
proportions, will only make the inevitable collapse that much more total, and
involve the destruction of Fiat currencies worldwide, and the forcible elimination
of the old order that created this enormous mess by a deeply discontented populace,
who will by this time be highly motivated by a lack of food, water and electricity.

If someone told you that the the broad stockmarket will double over the next
2 years you might reply "Great - I can recoup my huge losses!" Trouble is,
if you sell for your stocks for twice their current price in 2 year's time
and go into town to spend the proceeds you are likely to find that your dollars
will only buy a quarter as much as they would today, or less. Doesn't sound
so great now, does it? Forget the Austrian School of Economics - welcome instead
to the new era of the "Zimbabwean School of Economics" which has been field
tested and proven in the country which inspired its name. Proper application
of the schools' precepts will ensure that there is always enough money for
everything - problem with a budget deficit? - no problem, just create the money
and pay it off, problem with insufficient demand for Treasuries? - no problem,
just create the money and buy them, problem with interbank liquidity? - no
problem, just pump money into the banks until they have so much they are throwing
it out of their tall buildings by the binload, problem with restive workers
pay demands? - no problem, just create the money and pay them more, problem
with not being able to pay the CEOs of bankrupt companies their accustomed
huge bonuses? - no problem, just create the money and pay them their bonuses,
and why not double them? So we see that there really is no excuse for a liquidity
shortfall at all - the problem until now is clearly that those responsible
for creating the money have been too conservative, too timid, they have not
been bold and imaginative enough - perhaps this is because they have not fully
realized the power at their disposal, not fully appreciated that without the
restraint of a gold standard, the sky is indeed the limit - why should anyone
who wants anything go without? - especially if they are big and powerful and
have intimate connections with influencial figures in the government. Fortunately,
as the events of the past week have shown, they are waking up to the error
of their ways and starting to see the light. We can therefore look forward
to 100% cooperation from the US Treasury and Fed in the fight to beat back
the demons of illiquidity. The general stockmarket went wild on Monday celebrating
the adoption of the Zimbabwean School model and the unveiling of another plan
to siphon taxpayer Money into Wall St. The Precious Metals sector, overbought
after last week's spike, has had to surrender the limelight temporarily, but
don't expect that to last long. Gold and silver are going to go nuts as a result
of implementation of the Zimbabwean School's precepts. This is because an unfortunate
flaw of the Zimbabwean School's model is that it is more difficult to expand
the supply of goods and services in an economy than it is to expand the money
supply. This really is a shame because with so much money flying around many
people should by rights be rich, but instead they are going to spoil everything
by bidding up the price of good and services across the board, so that those
who want to preserve the purchasing power of their money will have to convert
it into something whose supply is finite and cannot be significantly expanded
at short notice, the ideal choices being gold and silver. When the world of
Fiat hyperinflates into oblivion the stampede into tangible assets will accelerate
and drive a huge parabolic spike in prices with those tangible assets that
are compact and durable being the most favored, these of course being gold
and silver. It is to be hoped that the stewards of the Fiat money system do
not wait until it collapses in smouldering ruins before they restore sanity
and order by reinstating The Gold Standard.

The above represents the opinion and analysis of Mr. Maund,
based on data available to him, at the time of writing. Mr. Maunds opinions
are his own, and are not a recommendation or an offer to buy or sell securities.
No responsibility can be accepted for losses that may result as a consequence
of trading on the basis of this analysis.

Mr. Maund is an independent analyst who receives no compensation
of any kind from any groups, individuals or corporations mentioned in his reports.
As trading and investing in any financial markets may involve serious risk
of loss, Mr. Maund recommends that you consult with a qualified investment
advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction
and do your own due diligence and research when making any kind of a transaction
with financial ramifications.